Non recovery of organisation debts 107-20022631

Debt Staff may waive or write off a debt if the organisation:

• asks for an interest charge waiver due to special circumstances
• is in short term solvency hardship
• declared bankruptcy or insolvency
• changed owners or ceased operation

A write off that is:

• temporary can apply when the organisation is in short-term hardship
• permanent can apply when no further recovery action is possible. For example, the organisation has ceased to operate

An organisation may experience Short Term Solvency Hardship when they cannot pay their ongoing expenses. This may include rent, power, wages etc.

Debt Staff can engage in discussion regarding the organisation’s financial circumstances to determine solvency. Strategic Debt Recovery staff can use the Financial Information Calculator if necessary, but this is not compulsory.

Sole traders or partnerships no longer able to pay debts can include the organisations debt in their personal bankruptcy. The business itself does not become bankrupt.

In these cases follow normal processes to write the debt off. A business may continue to operate when the sole trader/partner is bankrupt.

Bankruptcy applies to an individual. Insolvency applies to a company.

See What to do when a customer is bankrupt for more information.

When a company is no longer able to pay its debts, the company becomes insolvent. A company may have one of these outcomes:

• Liquidation - orderly winding up of a company’s affairs
• Administration - an external administrator makes a recommendation on the company’s future
• Deed of company arrangement – an agreement between a company and its creditors to manage its affairs during insolvency
• Strike off Action - the Australian Securities and Investment Commission (ASIC) can start strike off action to deregister a company
• Deregistered - a company that is no longer operating

Recovery options are limited after the sale or change of ownership. A debt is not transferable to another person or organisation to pursue recovery. Liability for the debt stays with the organisation who received the payment. This includes organisations who commence to trade under a previous Australian Business Number (ABN) or company registration.

The sale contract includes liability for debts. Contracts will vary between each sale. Do not request the sale contract to prove ownership.

Explore all reasonable avenues to recover outstanding amounts prior to the change of ownership or cessation of operation. Consider a permanent write off when no further recovery options are available.

A permanent insolvency write off only applies when:

• no further recovery options are available, and
• the organisation is no longer operating or has changed owners

Note: a permanent write off is not appropriate where an organisation refuses to pay or disputes the debt.

Written off debts will not accrue interest. Once a write off ends, the organisation has 14 days to make an arrangement or interest will accrue.

Debt Staff can waive the interest charge component of a debt. The team who raised the debt makes the decision to waive the principal debt amount. See the Resources page for a link to waiver delegations.

See Interest Charge (IC) for Centrelink debtors no longer receiving payments.